Share this content
0
845

Why does HMRC allow the VAT system to be abused?

Surely HMRC can block VAT repayments and check before over £500k VAT has been paid out?

Didn't find your answer?

Search AccountingWEB

Otherwise it seems anyone can replicate this very simple VAT fraud very easily by simply filing dodgy VAT returns as a builder of new homes until HMRC spot you are a crook (by which time the money has long since been spent of course). See:

http://www.mynewsdesk.com/uk/hm-revenue-customs-hmrc/pressreleases/somer...

Replies

Please login or register to join the discussion.

26th Oct 2018 14:36

I expect that VAT reclaims of 25K-30K per quarter are not that uncommon for home building businesses. I don't think it would be prudent to slow repayments to all businesses for the sake of the odd rogue trader, or we'd all be moaning about cash flow problems for builder clients.

Thanks (1)
avatar
to Tim Vane
26th Oct 2018 16:17

I think you missed the point. Such taxpayers should be marked as very high risk as they will not be paying any output VAT and they will be claiming input VAT for long periods (years) while the house etc. is (supposedly) being built. Such obviously high risk taxpayers should be under particular scrutiny by HMRC and there should be a block on input VAT paid of >£10k unless someone has checked them (and their invoices) out.

Otherwise there is absolutely nothing to stop anyone from repeating this very simple £500k+ fraud.

Thanks (0)
avatar
By jcace
to Justin Bryant
26th Oct 2018 16:20

Justin, are you really suggesting that all house builders are very high risk? What about other persistent repayment traders? When I've had clients who unusually submit a refund claim, they more often than not do prompt additional questions, but I don't think HMRC would have the resources to check all of the invoices for every return that resulted in a refund claim of more than £50K. And in this particular example it could be the case that no single return was at that level anyway.

Thanks (0)
avatar
to jcace
26th Oct 2018 16:58

Yes; all house builders are very obviously very high risk for precisely the reasons stated by me above i.e. claiming large amounts of input VAT for potentially years without any suspicion as to why they have not actually sold anything yet. Without proper checks it's a tax fraudster's charter and even a very dumb tax fraudster can work that out and make £100ks potentially very easily.

Thanks (0)
By Ruddles
to Justin Bryant
26th Oct 2018 17:12

I know of at least 2 local solicitors that were jailed for misappropriation of large amounts of funds belonging to clients and/or others (eg mortgage fraud). I therefore assume that you accept that all solicitors are very obviously very high risk for precisely that reason.

Thanks (0)
avatar
By AJF499
26th Oct 2018 15:22

I've found the opposite to be honest.

I have a client who does new builds so is always due a refund, and every quarter for the last year HMRC have withheld their money until 'further information' has been provided, even though the same stock questions are asked every time and they have already been answered in previous checks.

Thanks (0)
avatar
to AJF499
26th Oct 2018 16:15

Which begs the question how on earth did HMRC let this bloke get away with it for 5+ years and for over £500k!?

Thanks (0)
avatar
to AJF499
26th Oct 2018 16:16

When I was last in a regular repayment situation, we used to send copies of the (10) biggest purchases invoices to the VAT office at the same time as we sent the return in

that was a while ago though...

Thanks (0)
avatar
26th Oct 2018 17:28

There's a lot of information that we don't know. Did he actually sell any houses i.e. were there any figures in the output box and if so were they genuine? Either way he'll be at large in less than 18 months. I agree with Justin on this one and believe there should be some mechanism to risk assess these repayment cases.

Thanks (0)
avatar
By Matrix
to thomas34
26th Oct 2018 17:55

No in the article it says it was all fictitious.

A client had a £5k repayment in the first quarter and had to supply invoices so I agree with above - how did HMRC manage to make these payments without checking? Does he have to pay it back?

Thanks (0)
to Matrix
27th Oct 2018 10:06

I see the VAT was reclaimed by a limited company. The convicted defendant was the sole director of the company. He was convicted of being concerned in VAT fraud (to which he pleaded guilty).
So it appears the company received the VAT refunds - and may be required to pay them back (or may have already done so). According to the most recent accounts filed at Companies House the company has net assets of £5.
Whether the court can 'pierce the corporate veil' and confiscate the benefit of the offence from the convicted defendant will depend on a lot of things which we don't know (such as whether the company actually was genuinely trading at all).
Similarly the court might find that the convicted defendant had a 'criminal lifestyle' (as defined by s75 PoCA 2002) but that also depends on things we don't know.
If he has a 'criminal lifestyle' then the court could make a confiscation order against him for much more that the amount of the VAT involved (but again that depends on things we don't know).
So I guess reading this answer means that there is a lot more you don't know about this!

Thanks (0)
avatar
to davidwinch
28th Oct 2018 11:05

So what? That is all totally beside the point and is just horse & stable bolted door stuff and as someone like you should be aware the chances of recovering that £500k+ of our hard earned money are normally pretty slim in such cases in any event.

To be clear this sort of very simple & very high value tax fraud should not be possible in the 1st place. Otherwise HMRC may as well give these criminals an HMRC cheque book & credit card to spend unlimited taxpayer funds as they wish!

Thanks (0)
By Ruddles
to Justin Bryant
28th Oct 2018 11:45

Sob

Thanks (0)
avatar
29th Oct 2018 20:52

I've got a client who has recently (via a company) secured investment of £300k to open up a shall restaurant. The fit out costs have incurred £40k + of input vat which we claimed on the first vat return (submitted early July)
...Client is still waiting for the repayment 3 months later!

Client is going ballistic!

Thanks (0)
avatar
29th Oct 2018 23:23

Yes it's totally random whether they repay immediately or hold up repayment subject to checks. Means their "computerised algorithms!" are totally bolloxed.

Thanks (0)
avatar
15th Nov 2018 12:51

Here's another one (not even a builder this time, so it should have at least raised alarm bells early on as being suspicious) in the link below for £100k+:

http://www.mynewsdesk.com/uk/hm-revenue-customs-hmrc/pressreleases/groce...

You'd think HMRC would be too embarrassed to publicise the fact that their wholly inadequate monitoring of the VAT repayment system allows such a simple & large scale fraud in the 1st place!

Thanks (0)
By Ruddles
to Justin Bryant
15th Nov 2018 12:56

Give it a rest

Thanks (0)
Share this content